Carvana, state settle fight over vehicle titles, registrations

Online car retailer Carvana admitted violating Illinois law on the timely issuance of car titles and registrations and has agreed to follow enhanced rules to protect consumers, Illinois Secretary of State Alexi Giannoulias said Tuesday.

The agreement assures that Carvana can continue doing business in Illinois and ends a legal dispute that dates from last May when the secretary of state suspended its business license. Sales continued, however, because the company fought that action in court.

As part of the agreement, Carvana forfeited a $250,000 bond and agreed to additional licensing inspections by the Secretary of State Police, Giannoulias said. He also said his office can summarily suspend or revoke Carvana’s dealership license if more problems are reported.

State officials had accused Carvana of failing to get some customers their vehicle titles within a 20-day deadline set by state law, with some allegedly waiting four to six months for the documents. Officials also said Carvana illegally gave some buyers temporary vehicle registrations from another state to replace expiring registrations in Illinois.

As a result, some people were ticketed for not having valid registrations. Henry Haupt, a spokesman for Giannoulias, said the forfeited bond will be used to help customers recover any losses.

“Individuals who were fined for late registration are encouraged to contact the secretary of state’s office at (630) 693-0551 for more information,” Haupt said in an email.

Carvana delivers cars directly to customers but is also known for its brightly lit “vending machines” where buyers can retrieve vehicles. One is in Oak Brook and another was proposed in Skokie, but the company’s financial trouble raises doubts about its ability to expand.

With a heavy load of debt, Carvana has reported escalating losses and laid off staff as the value of its used-car inventory has declined. Its stock has lost about 96% of its value over the last year, and some analysts speculate the company will declare bankruptcy.

“The admission by Carvana demonstrates what we knew all along: that Carvana was violating the law in a manner that was harmful to Illinois consumers,” Giannoulias said. “Under my administration, I will do everything to ensure that proper safeguards are in place that protect Illinois consumers regardless of how they purchase a vehicle.”

A statement from Carvana did not directly address the complaints. “For the past eight years, we have been an economic engine in the state by providing Illinoisans with an unmatched e-commerce experience that includes great selection, home delivery and a 7-day money-back guarantee and today’s agreement with the Secretary of State allows us to move forward in our journey to becoming the largest automotive retailer,” said Alan Hoffman, Carvana head of corporate affairs.

“We look forward to working with Secretary Giannoulias to ensure customers continue having access to the best car buying and selling experience possible.”

A person close to the situation said Carvana has worked to resolve lingering issues with titles and registrations. Customers with problems can call (800) 333-4554.

Carvana has had regulatory trouble in other states. Similar problems with titles and registrations were reported in North Carolina, Michigan and Florida.

Company executives have said such issues have affected a small subset of its customers. They said Carvana has improved staff training and technology to better comply with state laws.

The company declined to discuss its financial situation and its impact on future business in Illinois.

Carvana’s problems with Illinois law are connected to several misdemeanor cases pending in DuPage County against Paul Breaux, who is listed online as Carvana’s general counsel.

Paul Darrah, spokesman for DuPage County State’s Attorney Robert Berlin, said Carvana’s settlement with the state will have no impact on the cases. Haupt said state officials have no position on how the misdemeanor cases should be handled.